Wagering on Stagflation

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20211011 COTD x Wagering on Stagflation - chart website

Source: Bloomberg, Unigestion, as of 30.09.2021.

In recent months, producer prices have risen significantly faster than consumer prices, providing further upward pressure on inflation if firms pass on these additional higher costs to end users. At the same time, nominal wage growth has remained relatively constant despite unemployment figures receding. In the past, wage inflation has derailed economies and pushed them into periods of stagflation.

Our chart compares the growth in hourly wages in the US against the unemployment rate, placing the current situation (red) into the context of the 1970s (dark blue) as well as the last couple of decades (light blue). While the number of data points remains low, thus far wages have not exhibited the inverse relationship typically expected over the short run.

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